Editor's Note: TouchTunes emphasizes that it is not selling direct to locations. An earlier headline might have erroneously implied TouchTunes' involvement
NEW YORK CITY -- Direct location sales have been hot topics for the jukebox industry in recent years. In 2009, a nationwide jukebox rental program piggybacking on the Ecast network prompted controversy and heated debate in the operating community. NSM Music is now running its "own your own" jukebox program, which it rolled out in December 2010. The former offered an inferior jukebox, and dealt with a music technology company that was on shaky financial ground, and is now out of business. The latter offers jukeboxes that connect to a limited music library; it likely has sold only a small number of boxes.

A key reason NSM's direct sales have been weak is that location-operator relationships remain strong throughout the country. But the opportunity for a location to own a TouchTunes jukebox is compelling, and could potentially break some of those relationships. The TouchTunes brand is now part of bar and nightclub culture and its lexicon -- it's known colloquially as "the touch tunes."

So it's no surprise that this new development has some operators more concerned than previous direct-to-location menaces. Vending Times has heard from two operators whose jukeboxes were lost to locations that purchased used TouchTunes boxes from a Michigan-based reseller.

So how can a jukebox sold by a third party connect to the TouchTunes network? This particular reseller offers older jukebox models -- Maestro, Ovation, Allegro, Rhapsody or Genesis -- at prices ranging from $1,000 to $3,000, which previously were owned by operators, and perhaps the reseller, too. Music and networking services are likely established through the operator agreement with TouchTunes, which came with the original purchase of the jukebox. Plug in, connect to the Internet, shake hands with TouchTunes and it's live.

Sources told VT that the pitch for the equipment promised 75% of the cashbox, which suggests the reseller was providing the service for 25%, and is likely making about 5% after fees were paid to TouchTunes. So if a jukebox earns $1,000 a month, the reseller makes about $50 on that, or $600 a year. (By the way, one operator also lost his pool table at the jukebox account).

TouchTunes is aware of the issue and is reportedly taking a close look at it. The company issued this statement to Vending Times:

"TouchTunes is and always has been committed to the operator business model. We believe that amusement operators provide an important service and enhance the value of our products with their marketing, promotion, training and support. We value our relationship with our operators and take our agreements with them seriously. When necessary, we take the appropriate steps to enforce contractual commitments, and take action on a case-by-case basis when we believe those commitments are not being followed."

This latest example of a direct-ownership program illustrates how digital music networks can enable alternative ways to operate jukeboxes, or ways to misrepresent contracts between operators and music providers. In 2009, AMI Entertainment Network Inc., another jukebox company, shut down a direct-to-location program involving its equipment and technology. The reseller, Shrewsbury, MA-based Lease America, is now suing AMI and the Amusement and Music Operators Association, which represents jukebox operators in the U.S., for alleged restraint of trade. AMI and AMOA are seeking to have the suit dismissed.